The Federal Reserve Board, in a move designed to lure back some of the more than $700 billion in Euro-dollars now circulating abroad, yesterday gave final approval to the establishment of international banking facilities in the United States. New York banks are expected to take the lead in setting up the new operations.

The new banking facilities, which will operate in free-trade zones, would accept foreign deposits and make loans to foreign businesses without being subject to interest rate ceilings or reserve requirements. Moreover, the facilities will be exempt from New York state and city income taxes. As such, they can compete head on with the Euromarket, which is primarily concentrated in London and the Caribbean.

New York banks, which originated the idea, greeted the news enthusiastically. Chase Manhattan spokesman Jim Conmy raised expectations of sizable new deposits. "OPEC has never heard of Nassau," he said; "they have heard of New York." He added, "It's legitimizing what has long existed as a backdoor market. For years U.s. banks have kept branches in the Cayman Islands as a way to pay competitive rates on Euromarket funds and to attract deposits that weren't limited" by rate ceilings. Chase will probably move most of its wholesale funding out of Nassau, he said.

Citibank Vice President Peter Howell was slightly more restrained."There's no question we're delighted, but we consider it unfortunate that the Fed insists on FDIC insurance for IBF accounts because it lessens competition" with Euromarkets. Howell said he thought a significant portion of the Caribbean money would return to these shores, but found it "unrealistic to expect even half (of the $700 billion) would be repatriated in the near term."

Regional reaction was mixed. American Security Bank applauded the action. But James D.M. McComas, executive vice president of Riggs National Bank, called it a "plot by New York banks to give London a run for its money as a world money market center." McComas said Riggs' operations in London, Nassau, Miami and Hong Kong would not be affected, because there is no advantage at present for foreign customers to bank here. The District does not offer any tax exemptions.

Maryland recently passed a bill exempting banks' international operations from franchise taxes if they are conducted in free-trade zones. Prince George's County has approved such a zone. Maryland National Bank's International Officer Roy Lewis said he was "encourged" by the development, but would wait and see before deciding whether to set up an IBF operation. Nine states have passed or are debating IBF legislation.

The decision becomes effective Dec. 3, 1981. Approval of the plan, first discussed by the Fed in 1979, was delayed due to criticism by non-New York banks. These objected that they could not compete successfully with the money center banks. Fed Chairman Paul Volcker, mindful of the criticism, said yesterday the Fed has tried to solve their clearing house problems and will look later at changing their capital basis, but added, "We can't solve all their problems."

The primary concern of the board members at yesterday's meeting appeared to be how to prevent multinational corporations from withdrawing their checking account funds at domestic bansk and placing them in international banking facilities to take advantage of what is expected to be an interest rate premium of between 50 and 60 basis points.(A basis point is one one hundredth of a percent.) It was finally decided to require U.S.-controlled foreign businesses to sign a statement upon opening an account that the money will be used only in foreign activities. Also, these nonbank depositors will have a two-day-minimum notice requirement before they can withdraw funds.

To enable more institutions to participate in IBFs, the Fed lowered the minimum transaction size from $500,000 to $100,000. This also puts the minimum within range of some foreign individuals. Deposits and loans can be denominated in both dollars and foreign currencies.